Abbott Labs: Diagnosing Growth in 2017

 | Jan 03, 2017 | 12:00 PM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




Back in September, I thought Abbott Labs (ABT) could hit $48. With the stock ten points below my target, is there any hope I'll ever be right? Can Abbott Labs be cured of a low stock price?

Shares of Abbott Labs are 15.6% off their 52-week high, set last August. The stock is down 12.3% in the latest one-year period -- and nowhere near my target of $48.

On Apr. 28, Abbott announced the acquisition of St. Jude Medical (STJ) for $25 billion. The merger will create a medical device market leader, with either the No. 1 or No. 2 positions in many products in the $30 billion worldwide market for cardiovascular devices. St. Jude offers products across the entire spectrum of cardiology, including heart failure and atrial fibrillation.

The Federal Trade Commission said Abbott agreed to divest two medical device businesses to settle charges that the St. Jude deal would be anticompetitive. The FTC said the merged company would hold nearly 70% of the market for vascular closure devices.

In addition, the firm would hold a monopoly on "steerable" sheaths, which are used to guide catheters for treating heart arrhythmias.

The companies have agreed to sell the Vado steerable sheath business and the Angio-Seal and FemoSeal vascular-closure products to Japanese medical equipment maker Terumo Corp for $1.1 billion.

The St. Jude merger is set to close on Jan. 4. Last week the company told analysts the deal will be accretive to ABT's adjusted earnings per share in the first full year, with $0.21 accretion expected in 2017 and $0.29 in 2018. The combined companies are expected to save over $500 million by 2020 in operational costs and sales expense.

Abbott will report fourth-quarter fiscal 2016 results on Jan. 25. Analysts are expecting earnings of $0.65 per share on revenue of $5.395 billion.

Looking forward, on a pro forma basis, the consensus is anticipating 2017 earnings of $2.42 per share and revenue of about $22 billion.

If those estimates are accurate, that should put Abbott on the path to 10% earnings growth and sales growth of 5% to 6%, which should give the stock a higher valuation.

If the stock doesn't turn around and head higher in the next few months, then it will be pretty clear that investors want more top-line growth. Maybe the St. Jude deal doesn't provide enough growth -- and it won't be the cure for a low stock price. We shall see.

Columnist Conversations

As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...
BBY is getting smoked this mornings(weak forecast).  The stock is off 8% after opening the session with a...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.